By: HUB’s EB Compliance Team
With the change in administrations and the Bostock Supreme Court case from last year, the approach to Section 1557 of the Affordable Care Act (“ACA”) has been evolving. As a result, as we enter renewal season for many employers, those that exclude gender reassignment surgery and other gender-confirming care from their plans may want to take a second look.
Title VII and Bostock v Clayton County, GA
Title VII makes it illegal to discriminate on the basis of a protected class. In Bostock v. Clayton County, GA, that was decided last year, the Supreme Court found that Title VII’s protected class of “sex” includes sexual orientation and/or transgender status. Because Title VII protections apply to the benefits of employment, the Bostock decision (as we wrote about here) may mean that employers need to update their policies and schedules of benefits to ensure that coverage is not excluded or denied for services on the basis of an employee’s sexual orientation and/or transgender status (among other protected classes).
Pivot Announced
Then, in May of this year, the Department of Health and Human Services (“HHS”) announced that ACA Section 1557 nondiscrimination protections apply to discrimination on the basis of sexual orientation and/or gender identity. This was based in large part on the Bostock Supreme Court decision. This new HHS interpretation reversed some of the Trump administration changes to ACA Section 1557 rules. Those Trump-era rules excluded these protections from the scope of ACA Section 1557.
A Case of Change
Subsequently, in Fain v. Crouch, a federal district court ruled that ACA Section 1557’s protections extend to all plans issued by a health insurer that received federal funding under the Medicare Advantage program (sometimes called Part C). Again, this is a reversal of the Trump administration change to the ACA Section 1557 rules. The Trump-era rules attempted to limit ACA Section 1557’s reach only to those specific programs that received federal financial assistance. Had the court followed that interpretation, only the Medicare Advantage plans, and not the other plans offered by that health insurance carrier, would be subject to the ACA Section 1557 nondiscrimination protections.
A district court is the lowest federal court and this decision could be overturned on appeal. However, the court’s decision, coupled with the HHS announcement has caused some employers to revisit their plan designs.
Next Steps
While the law is still a bit up in the air, plans that exclude gender reassignment surgery and other gender-confirming care are running an increased risk of violations of ACA Section 1557 and Title VII. They are potentially exposing themselves to lawsuits from disaffected employees and penalties from the government for such exclusions.
Therefore, employers that have, or are considering, such exclusions should consult with counsel regarding their own risks under Title VII and ACA Section 1557. Additionally, those employers should consult with their insurance carriers (if fully-insured) or third-party administrators/administrative services only providers (if self-funded). Even if the employer wants to exclude coverage for these items and services, the carrier or TPA/ASO may not be comfortable with those exclusions from its own risk perspective given the recent precedent on the application of ACA Section 1557. Finally, employers should consider the employee relations implications of such an exclusion, as well as the potential for negative publicity.
If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.
NOTICE OF DISCLAIMER
Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only, and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.